QUESTION 7 Alexandria and Bob can each choose to Work or Not Work on a task. Each person's output is 80 euro for Not Work, and 160 euro for Work. The cost of effort is 0 for Not Work and 70 euro for Work. The total output is shared equally between the two. For example, if Alexandria puts in her effort but Bob does not, her net income is 120-70 = 50. Assume both workers are completely selfish. Based on this information, which of the following statements is correct? O a. The equilibrium outcome is the socially optimal outcome. b. In the equilibrium outcome, they both end up with a net income of 80 euro each. Oc. If Bob chooses to Not Work, he will definitely end up with a net income of 120 euro. Od. In the situation where both Alexandria and Bob put in effort, Alexandria does not have an incentive to deviate.
QUESTION 7 Alexandria and Bob can each choose to Work or Not Work on a task. Each person's output is 80 euro for Not Work, and 160 euro for Work. The cost of effort is 0 for Not Work and 70 euro for Work. The total output is shared equally between the two. For example, if Alexandria puts in her effort but Bob does not, her net income is 120-70 = 50. Assume both workers are completely selfish. Based on this information, which of the following statements is correct? O a. The equilibrium outcome is the socially optimal outcome. b. In the equilibrium outcome, they both end up with a net income of 80 euro each. Oc. If Bob chooses to Not Work, he will definitely end up with a net income of 120 euro. Od. In the situation where both Alexandria and Bob put in effort, Alexandria does not have an incentive to deviate.
Chapter3: Scarcity, Trade-offs, And Production Possibilities
Section: Chapter Questions
Problem 3P
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Transcribed Image Text:QUESTION 7
Alexandria and Bob can each choose to Work or Not Work on a task. Each person's output is 80 euro for Not Work, and
160 euro for Work. The cost of effort is 0 for Not Work and 70 euro for Work. The total output is shared equally between
the two. For example, if Alexandria puts in her effort but Bob does not, her net income is 120-70 = 50. Assume both
workers are completely selfish. Based on this information, which of the following statements is correct?
O a. The equilibrium outcome is the socially optimal outcome.
b. In the equilibrium outcome, they both end up with a net income of 80 euro each.
Oc. If Bob chooses to Not Work, he will definitely end up with a net income of 120 euro.
Od. In the situation where both Alexandria and Bob put in effort, Alexandria does not have an incentive to deviate.
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